Few Portuguese today manage to completely escape the uncontrolled rise in house prices and rents across the country, with a special focus on urban areas. The housing crisis is perhaps the biggest problem of the century and it doesn’t stop in Portugal. It is difficult today to find a country in what we call “The West” that is not in a similar situation.
It is a crisis that has a direct impact on other problems we deal with as a society, such as poverty. For example, according to the CPAC (Child Poverty Action Group), around half of all children in poverty in the UK would not be poor if rents and house prices were lower, as would a quarter of adults in the same situation.
That said, what has dominated public debate recently is not so much the extent of the problem as its solution.
Is there, or is there not, after all, a solid and credible solution to the housing crisis? Yes, there is a credible, solid and even conceptually simple solution: build more houses. Why? To answer this question, it is important to first look to the past.
In 2008, the biggest financial crisis of the last decades imploded. It was a real estate crisis that devastated the construction sector. Many medium and small companies in this sector went bankrupt en masse between 2008 and 2012. Since then there has been a sharp drop in the annual pace of housing construction, particularly for the middle class and in urban areas.
In 2015, two professors at the University of Chicago estimated that if the housing construction slump had not happened, the GDP per capita American would be 74% higher than it is today and house prices in big cities would be lower. A second study appears to confirm these findings, saying that if significantly more homes had been built in three major American cities, in this case New York, San Jose and San Francisco, an American would earn, on average, between $8,700 and $16,000 more than he or she earns. even today I don’t live in any of these cities.
The counter-argument used in relation to this solution is usually to say that we already have more than enough houses, pointing, for example, to the number of vacant houses and suggesting measures such as rent control or the coercive leasing of vacant dwellings, as proposed by the Minister of Housing in recent days. These are ideas that have proven not to work.
In Berlin, when a rent control regime was implemented, the number of available houses on the market fell by 30%. In Stockholm, after the application of a similar regime in 2011, the waiting list for an apartment rose from five years to the current nine. They exist countless other examples, all with similar results, from San Francisco to Boston.
With regard to vacant houses, which apparently number around 700,000 in Portugal, in addition to doubts about the constitutionality of the Government’s proposal, many other questions remain in the air. How many of these houses are actually in urban areas, especially considering the accelerated depopulation that has taken place in the interior? How many of these houses are in conditions to be rented? What institutions and mechanisms are needed to implement such a measure? How much will it cost the taxpayer? There is still a lot of space to build in large urban centers, as long as the planning is done properly and is well supervised.
Perhaps it would be more useful for the Government to focus its efforts on a project to build housing for the middle class in large metropolitan areas, as has already been done in the past, especially now with PRR money which, unfortunately, is taking longer and longer to be implemented